ON Semiconductor (ON) BofA Securities 2024 Global Technology Conference summary

Transformation and operational strategy

• Shifted away from $475M of high-volatility business, improving predictability and sustainability.

• Divested four fabs, reducing fixed costs and targeting $160M in benefits by 2025-2026.

• Maintains a margin floor of 45% at 65% utilization, up from 29-31% in previous downturns.

• Long-term gross margin target is 53%, with each utilization point above 65% adding 15-20 bps to margin.

• Brownfield expansion strategy is 40% cheaper and two years faster than greenfield, enabling rapid market entry.

Fab-right strategy and East Fishkill update

• East Fishkill fab transitioned from 8- to 12-inch, increasing capacity without new construction.

• Achieved wafer cost parity at East Fishkill; dilutive impact from foundry business to roll off in 2025, adding 100 bps to margin.

• New products, including image sensors and medium voltage FETs, are ramping at East Fishkill.

• Replacing low-margin foundry business with new products at 60-70% gross margin.

Industrial and automotive market outlook

• Industrial business split between traditional (consumer-driven) and secular (megatrend-driven) segments.

• Traditional industrial stabilized after early softness; secular areas like alternative energy remain soft but are tapering.

• Automotive business expected to be flat overall, with silicon carbide (SiC) growth offsetting declines in non-SiC segments.

• Inventory digestion in automotive is delaying content-driven growth; no OEMs have canceled EV platform launches.

• EV and SiC market growth seen as temporary lumpy, but long-term trajectory remains intact.